Pimco Is ‘Large Overweight’ on China, Predicts Earnings Growth in Region
By Belinda Cao and Sara Eisen - Apr 13, 2011
Pacific Investment Management Co., manager of the world’s largest mutual fund, is buying Chinese stocks on the prospect for earnings growth as monetary tightening eases.
The emerging-market equity fund has a “large overweight in China,” where financial and property stocks are attractive and Pimco has a “favorable view of the yuan,” said Maria Gordon, who was hired last year to manage the fund. An underweight rating in Brazil reflects “better value elsewhere,” and some shares in India and Turkey are “likely to become cheaper before they start to rise,” she said.
China’s fourth interest-rate increase in six months, announced April 5, spurred strategists at four of the world’s biggest banks to recommend stocks in the fastest-growing major economy. Credit Suisse Group AG boosted its 12-month forecast for the Hang Seng China Enterprises Index, HSBC Holdings Plc increased its rating on China to “overweight,” and Macquarie Group Ltd. said investors should lift holdings. Citigroup Inc. advised buying options to bet on gains.
“This is the space wherein companies trade at a significant discount to their net asset values,” Gordon, formerly a portfolio manager at Goldman Sachs Group Inc., said in an interview with Bloomberg Television. “We look for companies that may have been affected by cyclical adversity, where the earnings story is likely to be better once the story is normalized.”
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